Home Equity?

Paying for College
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<p>amen..........</p>

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<p>cloverdale-
I am not unhappy that we still live in our modest first house purchased in 1983 and that it is now worth about $500,000. I HOPE we get to sell it someday and downsize and work less than now.
BUT the taxes are $8000+/year and our income is very unimpressive. We choose to stay here for now. We love our house, our neighbors, our town and the school district that helps educate our disabled 16 year old. So, should we have to relocate to send one child to school?
Our 19 year old is at a wonderful instate public u that is relatively affordable. He did apply to a few very expensive private schools that used the profile.
So those schools can claim we should borrow the equity. That would require the income to pay the loan. It is beyond our control that the equity ballooned but not our income to borrow against it! It's a catch 22 alright.</p>

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<p>Musicmom: no doubt, it can be difficult. thank god your S is at a great school like TCNJ. And I am glad that you are in a town you love, that provides the things that are important to you. But I agree with Cloverdale; that you are lucky to have these wonderful things, does not change the fact that you are living in a half a million dollar house. As someone else living in NJ whose housel will not go for half that, I envy you. I'd love to move back home (I remember we share an alma mater) but frankly, I can't afford to.</p>

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<p>Garland-
Yes, I think that the county we grew up in is one of the most high priced, rapidly growing counties now in NJ. Not that any counties in NJ are 'cheap' to live in these days!</p>

<p>Yes, we are choosing to stay in our home. We also choose to generously fund my 403b plan at work. So, we get a great quality of life and good public schools and maybe a retirement someday.
We also get to drive a 13year old minivan, 'vacation' at our public pool, and, oh yeah, open a home equity line to help pay for that 'affordable' public u our son attends. And don't let me start on CAR insurance!!!:)</p>

<p>I do imagine we will move when our daughter is through school.....by necessity, not choice.</p>

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<p>This sounds like us. Only the difference is that next year we will be funding the college educations of TWO kids with our home equity line and every nickel of my salary...every cent. DH's income will pay the rest of our bills including our mortgage, property taxes, insurance, living expenses, etc. I'll probably take a second job in the evenings. We do not qualify for need based aid at the Profile schools...we have about $300000 in home equity. My guess is that at some point in the next four years we will be refinancing our house (again) so that we can pay the college bills. Our home equity line is only $50,000....and that will get eaten up very quickly.</p>

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<p>I can't even IMAGINE what families with TWO (or more?) in college at the same time are going through!
Our daughter will not be attending college but she still racks up some tidy sums on tutoring, therapies, medications, etc, etc. And these may be ongoing throughout her life.....
At least I have dreams of kicking her brother out of the house someday!
Only kidding really.......maybe a gentle nudge?</p>

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<p>actually people with kids in college at the same time will pay out less over the long run than those who did like we did and have our kids 8 years apart because we thought it was more affordable.
Say your EFC is $15,000- about the same price as instate public school
If you have two kids in college- and they attend a school that met 100% of need, your EFC may just be split between them so the amount you pay out is the same whether there is one or two in school.
But because we couldn't afford to have two kids so close together, our oldest will be long graduated college before her sister even enters college- so not only will we only have one in college but we won't even have the other dependent deduction.( at the same time we will be trying to make up what we took out of our retirement so that we could afford college)</p>

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<p>musicmom --well then, you take a hit with the house but come out ahead with the old minivan. Doesn't profile ask for the value of your cars, too? Actually, it is my opinion that someone with $100K worth of cars should have to downgrade before the school shells out, it is only fair. I know, myself, what it is like to live in an expensive suburb with all the accoutrements. I live, now, in an urban area with many poor --what a difference. It is possible, living in those expensive suburbs in NJ, Westchester, Fairfield County, etc., to lose track of what poverty and need really mean. No one but no one HAS to live in a 500K house: even in your situation, it is a choice.</p>

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<p>For schools that count home equity, that's clearly the reason why. People make lifestyle choices, and some colleges may not see a reason to subsidize a family with a $500K house and a $300K mortgage that is struggling to meet the mortgage and tax payments vs. another family that has a $150K house and a manageable $80K mortgage.</p>

<p>Obviously, geographic differences exist, but wherever you live home equity is part of your net worth. The fact that the FAFSA ignores it is a real bonus to homeowners.</p>

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<p>I'm not suggesting it's a good idea, but there are different ways to tap the equity. A term loan with a balloon payment, for example, wouldn't stress current income (though some require modest interest payments).</p>

<p>A much better approach would be to look at schools that don't factor home equity into the equation. If your home equity is a big chunk of your net worth, your financial aid situation will be a lot better.</p>

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<p>Emerald....you exposed nothing and you know nothing. And my circumstances and the circumstances of my siblings and myself are NOYB....I don't have time to check your old posts, nor would I have any concern to do so...I can assure you that my interest is anything but spurious...you are a bit like the guy you unintentionally cut off on the freeway who then chases you off the freeway to get even...everyone is entitled to his or her own opinion and it is through such discussions that people come to an understanding or that public opinion results in things changing for the better. Why do I know that at my age when you don't at yours????</p>

<p>Musicmom...good for you. Cloverdale is wrong. You do not have a choice to stay put. What you are doing is not only the best for your family but it is the best for society to have your disabled 16 year old educated and in a good place. And if, like my family, your house is a $72,000 house that a fiction says is now worth more, you are really NOT living in a "$500,000. house." That makes it seem like you are living a wealthy lifestyle, which you are certainly not. You are already sacrificing...and no doubt could not qualify to buy your home today!</p>

<p>Mr. Dooley, I sure would like to know where you can find a $150,000 house!!!! What would you do when the balloon payment is due??? So you would then possibly have to sell your house at whatever price you could get? Not a good plan at all, in the long run. I understand that home equity is part of your net worth. But the bigger question is what the average home costs in your part of the country, in my humble opinion. If a starter home is $400,000 in one area and a $400,000 home in another area is a 3000 sq ft home in the best area, then that is an issue. Again, families have to have the income to support the loan and if they do choose to sell, they have to have somewhere to live. Southern California is a tough one, because rents are so very high and most places that a family could fit in rent for way more than a house payment. The geographical area is a huge factor. I think that IF they ask you to access your home equity, it should only be done when you have the income to make the payments. This can be a very simple formula. IF you are expected to sell your home to access your home equity, it should only be done IF the general area you live in is one that will allow you to find a place to live at a price similar to what your family is already paying, in other words, where your family could find a place to live that they can afford. Just my opinion...which is what this all is, isn't it?????</p>

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<p>I am extremely familiar with the kinds of burbs inhabited by musicmom. I assure you the $500K value of her house is not a fiction. Not when it can be sold for that amount now and probably much more up the road, not when that cash can fund retirement, trips and the like after the collge expenses are done. All these suburbs have smaller houses, even apartments, and there are neighboring or nearby burbs in the tristate area that cost less with excellent programs for accommodation of the learning disabled. Think what you want,pk, but colleges who use the profile see it my way --and if one of those colleges meant enough to musicmom (and I am not saying they should) she could make a decision to live differently. The house is real and not imagined wealth --one can even take a reverse mortgage, where no payments are required. </p>

<p>I grew up in the city projects in Brooklyn NY, so I have little patience for people who mistake a desire to live in a certain style for true neediness.</p>

<p>We all make personal decisions. I agree with musicmom too, as to her decision. I would do the same thing. But I would not ALSO feel entitled to have a college subsidize that decision. I do NOT think this lifestyle, which I consider very comfortable, to be something a college needs to underwrite when there are so many people living in the projects, in the inner city, in real poverty, who would view that starter home in a suburb so wealthy the house is worth $500 K as a castle.</p>

<p>I think there is a sense of privilege here that somehow fails to fathom the real world.</p>

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<p>cloverdale, I live in a working class community in a starter-home (1100 sq. feet) in one of those tracts where all the houses look the same, in northern Calif. (near SF). According to zillow.com, every house on the block is worth $700K. (Zillow is cute - according to them, my house went up in value $4200 in the last <em>week</em>). I've been in the house 17 years and currently owe $15K more on it than I did when we bought it. I can't qualify to borrow any more on my income (around $45K/year). </p>

<p>Median home prices in my area are $780K, so basically the word for my house around these parts is "cheap". As a Californian, I pay property taxes based on the assessed value when I came in, but if I were to sell the house and buy another, cheaper one (assuming that one could be found), my tax base would go way up. You think I should move out of state? Try looking for a job in a new area when you're 52. (Of course, I'm still too young to take advantage of any real estate tax breaks that kick in at age 55) </p>

<p>I'm not whining about the financial aid calculation -- I recognize that I'm better off than a family with no home. My home equity is a pretty good substitute for a retirement account. But it simply is not a fund that can be cashed out, nor borrowed from on my income - that is, no matter what, it is not a source for college financing. </p>

<p>Fortunately, my kids have in-state public school options if we cannot swing private college. But the home-equity thing is a problem for a lot of middle class families. Even if colleges consider the equity, they really should not weigh those dollars as if they were the same as cash. They should look at income, local property values, and then apply some sort of actuarial formula that take into account the fact that people live in their homes -- in other words, maybe you need to subtract out the value represented by the usage & occupation from the paper value of the equity. I can sell my house, but it won't obviate the need for a bed to sleep in and a roof over my head: so however you figure it, there needs to be an allowance made for that expense if you count my house's value as an "asset".</p>

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<p>calmom, I agree with you, and my home is not worth anything near 700,000.</p>

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<p>Zillow.com is fascinating - google type hybrid maps and house valuation/tax bills. Check out the property taxes on this place - unbelievable!!!
<a href="http://www.zillow.com/HomeDetails.z?city=Bernardsville&state=NJ&zprop=39844082%5B/url%5D"&gt;http://www.zillow.com/HomeDetails.z?city=Bernardsville&state=NJ&zprop=39844082&lt;/a&gt;&lt;/p>

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<p>Thanks for the Zillow.com link. wow.</p>

<p>Re home values--on the one hand, I have no sympathy for people who overextended themselves, housing-wise, (or car/boat, for that matter) for 17-18 years and didn't save a penny for their child's inevitable college needs.</p>

<p>On the other hand, I do have sympathy for people who, through no fault of their own, are "rich" on paper. When the economy tanks and the housing bubble bursts, all that value on paper won't be worth the paper it's printed on, so I wouldn't advise anyone to take out a home equity loan for college, even if colleges expect you to. They are in the business of selling themselves, not dispensing financial advice.</p>

<p>I do know a family, however, that moved from a comfortable home to a smaller one in the same neighborhood so they could afford college for their 3 children. They realized FAFSA/CSS wasn't going to be kind (too large income) and took steps to help their kids go where they wanted to go.</p>

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<p>Wow, had no idea this topic would get so animated.</p>

<p>There are so many sides to this issue and I agree with MANY of them!
Of course, our $500K house is 'real'. Of course, we are better off than families with no house. But we did not purchase it recently with an exorbitant mortgage and then whine that we have no college fund for our children. As pkamdp notes above, we absolutely could not qualify to buy this house today. We bought it 23 years ago for 92,000 and had to struggle with a small mortgage at that. We have borrowed against the equity (for a second bathroom) and now for college. But I'm talking about 20,000 total. There is no way our income could cover 100,000-150,000 for a loan for an expensive college.</p>

<p>So, we live within our means (probably below) and are buying a moderately priced education for our son. We don't feel entitled to anything and are happy with the little aid we do receive.</p>

<p>I think calmom has it just right. I'm glad that there are a few that might see what I'm trying to say.</p>

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<p>Musicmom-</p>

<p>Good for you. Sounds like a very wise plan.</p>

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<p>Only if you happen to qualify for need based aid AND your schools meet full need. We don't qualify for much need based aid AND the colleges our kids are attending don't meet full need. Next year, we will likely be paying about $70,000 out of pocket (or out of home equity, or out of savings or something) to send our two kids to college at the same time. Spreading it out over 8 years would have been just that...spreading it out over 8 years. We wouldn't have saved a dime.</p>

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<p>You can find nice homes in this range in lots of places - of course not in major urban areas, California, and "hot" markets. There are many communities where the median home price is actually below this level: <a href="http://www.realtor.org/Research.nsf/files/REL05Q4T.pdf/$FILE/REL05Q4T.pdf"&gt;http://www.realtor.org/Research.nsf/files/REL05Q4T.pdf/$FILE/REL05Q4T.pdf&lt;/a&gt;&lt;/p>

<p>I do agree that if your home is your primary asset and it has appreciated dramatically, it makes the financial aid issue more complex at schools that consider home equity. Fortunately, most don't.</p>